EMPLOYER PROVIDED COVERAGE: Many employers offer free or reduced cost health benifits. Generally, employers split the cost of health insurance with their employees. Employees who are married and/or have children can obtain insurance for their whole families. The federal government provides assistance in these situations by giving employers a tax-deduction against their corporate taxes. Money that employers spend on providing health benefits to employees is deducted from taxable income/profits before calculating taxes. Money that employees spend on employer provided health-care is paid for with pre-tax dollars. Therefore, if an employee makes $50,000 in salary and spends $6,000 on health insurance, the employee's taxable income drops to $44,000.
What about same-sex couples? There situation depends on the state they are in and the company they work for. In some states like Massachusetts and Vermont, spouses in same-sex couples can get spousal coverage just like opposite-sex couples can. However, in most states, the company you work for must elect to buy special benefits for spouses in same-sex couples.
There are four major types of private health plans in America. Fee-for-service (FFS) plans allow people to see any doctor they want and pay the full cost of all expenses. Generally, only corporate executives get this type of coverage. (Some companies call it exec-u-care.)
Health Maintenance Organizations (HMO) strike cut-throat deals with a small set of doctors who provide coverage on the cheap. HMOs greatly emphasize preventative care to cut costs as well. They also emphasize the use of generic drugs by forcing users of "brand-name" medications to pay $15-$35 per script filled; that's called a co-payment. HMOs are the cheapest for employers and employees; however, they greatly restrict treatment options (doctor choices, medication choices, etc.). Blue-collar workers often get HMOs.
Prefered Provider Options (PPO) split the difference. They are really much like HMOs; however there are generally more doctors in the network and you can see doctors outside your network if you don't mind paying more. Non-executive, white-collar workers often get PPOs.
Health Savings Accounts (HSA) are a totally different critter. Most health insurance plans (FFS, HMO, PPO) cover both routine and major medical costs. They have high premiums (insurance sticker price--$6,000 to $7,000) and low deductibles (amount you pay before benefits start--generally $500 to $1000). With HSAs, its the other way around. Premiums with HSAs are about $1,500 less, but deductibles are about $2,500. Employers make up the difference by creating special accounts, and putting $2,500 in each employee's account every year. The $2,500 goes in tax-free. Any money you spend on health expenses goes out tax-free. Any money in the account that you don't spend goes stays in your account; you get to keep it! Unfortunately, HSAs fiscally discourage individuals from getting routine care.
The major problem with employer provided insurance is its expense. Even with the tax deduction, health benefits severely cut into corporate profits (reducing corporate health) and employee salaries. Moreover, as costs spiral upward, this puts more pressure on employers and employees.
SELF-EMPLOYED WORKERS: People who own their own businesses or are independent contractors must buy their own insurance. (Independent contractors are paid by another company but are not company employees.) The self-employed can claim a tax credit for health-insurance premiums. Tax credits are applied against the total tax to be paid. For example, if a self-employed person must pay $6,000 in income tax and spend $5,000 on health insurance, then the person's tax bill will only be $1,000. However, if a self-employed person must pay $4,000 in income tax and spend $5,000 on health insurance, then the person pays no tax but does not get a check from the government.
EVERYONE ELSE: If you want private insurance, you must pay full price. You must apply for insurance and can be turned down if you have certain "pre-existing conditions." In an attempt to limit this problem, Congress passed HIPAA (Health Insurance Portability and Accountability Act). HIPAA prohibits discrimination on the basis of "pre-existing conditions" if the potentially insured person has had "credible coverage" for 12 consecutive months. They also passed COBRA that requires employers to offer coverage to downsized employees (released due to slack work conditions); however, downsized employees must pay full price for coverage. Downsized employees are guaranteed COBRA for 18 months; disabled persons and children are guaranteed COBRA for 36 months.
Federal tax law also offers some help. People who buy their own insurance but cannot get a tax credit can claim a deduction if their expenses account for more than 7.5% of their income.
